Deadline Looms for States on New High-Risk Pools

WASHINGTON -- States have until the end of day Friday to inform the Department of Health and Human Services whether they want to run their own temporary high-risk insurance pools established by the new healthcare reform law, or whether they want the federal government to do it for them.

Two states -- Nebraska and Nevada -- have already indicated they aren't interested in running their own pools, while Pennsylvania has expressed interest in doing so, according to reports.

The pools were established by the Patient Protection and Affordable Care Act (PPACA) and are one of the first major parts of reform to be implemented.

HHS Secretary Kathleen Sebelius announced the pools in a letter to governors and independent insurance commissioners earlier this month, and states are required to let HHS know by April 30 whether they want to use federal grant money to set up a pool, designed to assist their residents with preexisting conditions get coverage.

The law provides $5 billion to fund the program from July 1, 2010 through Jan. 1, 2014. Money will be allocated based on each state's population as well as its costs.

Many states already have such high-risk pools, although in some states, the pools might be more expensive for patients than the HHS-directed pools would be.

The new pools will have to meet certain requirements. For example, eligible patients must be U.S. citizens or legal residents and have been uninsured for at least six months. The coverage offered must have an out-of-pocket limit no greater than $5,950 for an individual, and there can be no preexisting condition exclusions. In addition, insurance companies would be prohibited from charging an elderly person any more than four times what a young person would pay.

States have three options under the new law: establish a new high-risk pool if the state currently doesn't have one, operate a new pool alongside a current one, or build on existing state programs designed to cover high-risk individuals.

Alternatively, states could do nothing, in which case, HHS would run a federal high-risk program in that state.

"HHS is prepared to administer this program in any and all of the states that want us to, but we also understand that some states already have models on how to do this well and efficiently and will want to build on that experience to operate your own new program," Sebelius told state insurance commissioners on a Thursday call.

"But whether you opt-in to the federal option or you choose the state option, the bottom line for the American people is the same: uninsured Americans with preexisting conditions will have access to affordable insurance through the temporary high-risk pool program," said Sebelius. "And regardless of which option you choose, I want to emphasize that this is a federal program that will be supported entirely by federal funding."

Some states are arguing that the requirement that only uninsured people can join the pools is unfair to people with preexisting health conditions who have been paying for insurance through their state's existing high-risk pools.

According to the Kaiser Family Foundation, about 200,000 people were enrolled in high-risk pools in 34 states in 2008. The high-risk pools are more expensive than normal insurance pools, and patients in seven states in 2008 were paying average annual out-of-pockets costs well over the $5,950 limit.